Freeze! The latent potency of Account Freezing Orders

Amelia Clegg

18th March 2019

On 7th February 2019, the National Crime Agency (“NCA”) flexed its muscles under the new powers afforded to it by s.16 of the Criminal Finances Act 2017 “CFA 2017” (amending s.303Z Proceeds of Crime Act 2002 “POCA 2002”), and forfeited money in three UK bank accounts suspected of containing the proceeds of crime.

The National Economic Crime Centre (“NECC”) followed this by freezing 95 bank accounts belonging to Chinese students in the UK on 28th February 2019. Under s.303Z POCA 2002 law enforcement agencies may apply for Account Freezing Orders “AFRO” which allow them to freeze money held in bank accounts suspected for use in unlawful conduct. These sums can then be forfeited under Account Forfeiture Orders (“AFOO”).

The majority of the accounts frozen on 28th February 2019 are held by students studying in the UK. The accounts were identified by a bank as part of their anti-money laundering processes and officers from the NECC assessed that the students are likely to have been targeted by organised crime groups, specifically to launder the proceeds of crime . Although these accounts belong to students, the NCA estimated total value of the frozen sums as £3.6 million. Officers identified a range of methods typically associated with money laundering in relation to these accounts, including making small and frequent cash deposits to avoid scrutiny by the bank and law enforcement (“smurfing”).

Account Freezing Orders

Applications for AFROs are civil in nature but are heard in the Magistrates’ Court. For a court to grant an AFRO, it must be satisfied that either (a) the money is recoverable property or (b) that the money is intended by any person for use in unlawful conduct. An AFRO may be made ex parte, pursuant to subsection (4), if the circumstances of the case are such that notice of the application would prejudice the taking of any steps (under Chapter 3B CFA 2017) to forfeit money that is recoverable property or intended by any person for use in unlawful conduct. The funds can remain frozen for two years.

Exclusions

As with traditional freezing orders (such as Mareva injunctions), the court may vary an AFRO, and has the power to make exclusions from the prohibition on making withdrawals or payments from the account to which the order applies. An exclusion may be granted to enable the account holder to meet their reasonable living expenses, to carry on any trade, business, profession or occupation and to meet their legal expenses. Where a magistrates’ court exercises the power to make an exclusion for the purpose of enabling a person to meet legal expenses that the person has incurred, or may incur, it must ensure that the exclusion is limited to reasonable legal expenses that the person has reasonably incurred or that the person reasonably incurs. The court is obliged to consider whether the person might be entitled to representation under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and, rather perversely, under s.303z(6)(a), the “desirability” of the person being represented in any proceedings under this Part in which the person is a participant (which begs the question, “when is it undesirable for a person to be unrepresented?”).

In short, applications to vary AFROs can be time consuming, technical and are likely to be met with vigorous resistance by the enforcement authorities.

Conclusion

AFROs and AFOOs are a powerful weapon in the arsenal of the Serious Fraud Office, NCA and NECC, and yet they have not gained as much traction in the press as Unexplained Wealth Orders. This is surprising, as when used following Suspicious Activity Reports (“SARs”), they provide a quick and easy route for enforcement officials to freeze, and subsequently forfeit, funds. Those affected by AFROs and/or AFOOs would do well to seek legal advice both to discuss applications to vary and the potential implications for future criminal charges.

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